Discuss The Advantages Of Cost Accounting?

3 Answers

Cost accounting is very important to businesses as it shows the total costs and expenses annually. It is basically a calculation used to gather these total costs involved in a business. It is used mainly by managers within a business model and allows them to see the total expenses within the company and thus see the profits or if any changes are required.

Cost accounting differs from management accounting and financial accounting as it is more specific. It allows you to see in high detail, the businesses annual costs including tiny expenses such as paper etc.

Other benefits include:

Being able to avoid out of date or unusable products and supplies through accounting for such items efficiently

Allows a manager to see what activities and products are bringing in and will bring in profits as well as those that are reducing profits

Have control over employee salaries

Overall budgeting

Employee bonuses

Allow tolerance monthly or annual costs that are not controllable

It enables the manager to work out if self-production is better or worse than seeking products elsewhere

Shows the trend in sales across a year and/or season

Cost accounting is divided into elements or rather, subcategories. This makes it easier to see every detail of expenditures and income within each department of the business. These are:

Supplies

Utilities

Salaries

Maintenance

Rent

Labor

There are fewer disadvantages to this method of accounting than most others.